Gold extended losses on Monday after a better-than-expected US jobs report signalled strength in the economy and stoked speculation the Federal Reserve could raise interest rates soon.
Bullion’s recent losses take it closer towards the key $1,200 an ounce level, a breach of which could trigger technical selling. Spot gold had eased 0.4 per cent to $1,216.91 an ounce by 0330 GMT, after dropping 0.8 per cent on Friday.
“We could see the markets start coalescing around expectations that the Fed will now put a rate increase back on the table, perhaps for some time in May or June,” said INTL FCStone analyst Edward Meir.
Gold could fall below $1,200 soon and test key double bottom support at around $1,170-$1,175, he said.
Gold posted its biggest quarterly rise in nearly 30 years in the March quarter, rallying 16 per cent as expectations faded that the Fed would move to normalise interest rates due to concerns over the global economy.
The US central bank had raised rates in December for the first time in nearly a decade.
The metal is highly exposed to rising rates, which lift the opportunity cost of holding non-yielding assets, while boosting the dollar.
Data on Friday showed non-farm payrolls rose 215,000 last month, higher than expectations of 2,05,000, underscoring the strength in the US economy.
Interest rate futures
US interest rate futures suggested traders are now betting the Fed will next raise rates as soon as November, versus December ahead of the report.
Wall Street’s top banks held firm to their expectation for a rate hike in June, according to a Reuters survey conducted on Friday.
In the near term, support for gold sits around $1,215 and below this at $1,210, said MKS Group trader Sam Laughlin.
Hedge funds
Investor positioning in gold is largely bullish. Hedge funds and money managers boosted their bullish bet in gold in the week to March 29, to the highest since the end of 2012, US Commodity Futures Trading Commission data showed on Friday.
Assets in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.15 per cent to 818.09 tonnes on Friday, but remain near the highest in over two years.
In the wider markets, Asian share prices held firm on Monday after solid US payroll data underpinned investor risk sentiment.